Contribution margin per unit and as a ratio — what each sale contributes toward covering fixed costs and profit.
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Contribution margin is what each sale "contributes" toward covering fixed costs (Shopify plan, app subscriptions) and then toward profit. It's selling price minus all variable costs (COGS, shipping, payment fees, ad cost per unit). Once total contribution covers your fixed costs, every additional sale is pure profit.
Contribution margin per unit = selling price − variable cost per unit
Contribution margin ratio = contribution margin ÷ selling price
Total contribution = contribution margin per unit × units sold
Use contribution margin when calculating break-even units (it's the denominator) or when comparing products that share the same fixed-cost base. Two products with the same gross margin can have very different contribution margins if they have different ad costs.
| Metric | Value |
|---|---|
| Selling price | $40.00 |
| Variable cost (COGS + ship + fee + ad) | $29.46 |
| Contribution margin per unit | $10.54 |
| Contribution margin ratio | 26.35% |
| Total contribution (100 units) | $1,054.00 |
If your fixed costs are $500/month, $500 of that $1,054 covers fixed costs — leaving $554 in net profit. That's why the break-even units calculator divides fixed costs by contribution per unit.
How many units you need to sell to cover fixed costs (Shopify plan, apps, ad budget). The line between red and black.
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